New rules: Putting an end to the long-running discussions, the Reserve Bank of India (RBI) has decided to implement new rates of tax collection at source (TCS).
Actually, Tax Collection at Source or TCS is a tax levied on any type of transaction done by Indian citizens including study, travel or investment abroad. The changes in TCS rules will come into effect next month from October 1, 2023. These rules will have a direct impact on any kind of expenditure and transactions made abroad. Let us know how much TCS will be charged for which work-
If a person spends a large amount abroad within a financial year, TCS will be applicable on it. However, TCS will not be charged when using international credit cards.
TCS rate for outward remittance
Under the Reserve Bank of India (RBI) Liberalized Remittance Scheme (LRS), any person can send up to $ 250,000 abroad in a year. According to the new rules, from October 1, 20 percent TCS will be levied on sending amounts of more than Rs 7 lakh for any purpose other than medical and education.
TCS on education expenditure
If a person sends money abroad for education, then no TCS will be charged on the amount less than Rs 7 lakh. But if this amount is more than Rs 7 lakh then 5 percent TCS will be levied on it. However, if this amount is borrowed from an approved financial institution, only 0.5 percent TCS will be applicable.
TCS on medical expenses
Like education, no TCS will be applicable on medical expenses up to Rs 7 lakh. But if this amount is more than Rs 7 lakh then 5 percent TCS will be levied.
TCS on tour packages
After the first of the next month, if a person buys a foreign tour package worth less than Rs 7 lakh, then 5 percent TCS will be levied on it. At the same time, 20 percent TCS will be charged on purchasing a tour package worth more than Rs 7 lakh.
TCS on investment
If a person invests more than Rs 7 lakh in foreign stocks, mutual funds, cryptocurrencies or property in a financial year, 20 percent TCS will be applicable on that amount. However, no TDS will be levied on domestic mutual funds with foreign stock exposure.
TCS on Debit/Credit/Forex Cards
If a person makes a transaction of more than Rs 7 lakh through debit and forex cards, then 20 percent TCS will be applicable on it from the 1st of the next month. However, no TCS will be charged on transactions made through credit cards.
TCS rate for the financial year
There are different TCS rates for the first and second half of any financial year. But the limit of Rs 7 lakh for an individual is for the whole year.
Various sources and limitations
If a person uses different banks or dealers to make any expenditure abroad in a financial year, the limit will be only Rs 7 lakh across all sources. However, this limit is different for different purposes.
How to get TCS refund?
It is most important for a person paying Tax Collection at Source (TCS) to know that it is not a separate tax but a tax credit. Which can be compensated from the taxes payable during income tax filing or advance tax payment. Moreover, if it has not been compensated, it can be claimed as a refund while filing the Income Tax Return (ITR). However, experts say this may cause cash flow problems for some taxpayers as the funds will remain locked after the processing of ITR till the refund is made.